Like DeFi coins and ICOs before them, non-fungible tokens or NFTs are officially the latest in crypto craze. However, many artists and analysts agree that despite the short-term hype, NFTs are viable in the long run.
Indeed, NFTs have a number of promising use cases, in particular NFTs have been identified as the future of the creative industries. However, the concept of NFT is still so alien to most of the world that many of the people who would benefit from its creation will be lost hearing the words “non-fungible”.
In other words, there is definitely a learning curve when it comes to entering the world of NFTs. Here is (almost) everything you need to know.
Should you do an NFT?
Who can make a non-fungible mark?
Gagan Grewal, CEO of Mogul Productions, told Finance Magnates that the answer really is “anyone.”
However, Danny Holland, Smart Contract Engineer at Vega, told Finance Magnates, “Some NFT platforms require artists to be pre-approved by the platform or the community, while others do not. Rarible, for example, is 100% open to anyone to create NFTs. “
In essence, however, “anyone can create an NFT including artists, musicians, entertainers, entrepreneurs, corporations, and platforms,” Grewal said. “It is important for the Creator to consider the value an NFT brings to them. NFTs are great at separating intellectual property from creative works that could otherwise be easily copied and distributed online. “
Tal Elyashiv, founder and managing partner of SPiCE VC, said, “When you decide whether or not you need something of value that fits the NFT paradigm,” Elyashiv told Finance Magnates.
“In other words, a unique item or experience that is of value and interest. Currently, digital art, physical art, collectibles, assets in games, virtual properties, rare videos, etc. are mainly offered as NFTs. It can easily be expanded to include tokenized physical assets such as real estate, cars, wills, and more. “
What do NFT buyers really own?
What exactly is a non-fungible token? Basically, it is a unique digital collector’s item, analogous to a unique Pokemon card or a unique painting in the “real world”.
However, selling an NFT does not necessarily mean that you are selling the intellectual property associated with the work. In addition, multiple NFTs can be made and sold in conjunction with the same work. For example, NFT art world’s superstar Beeple has sold multiple NFTs in conjunction with individual works, which hasn’t stopped them from skyrocketing in value.
For many new to the NFT space, it is unclear what an NFT really is in terms of ownership. Beeple explained the concept of NFT ownership this way in an interview with the School of Movement: “We’re used to the fact that you can copy anything and reproduce it a million times,” he said. “So just the concept that something is like owning a digital file and being able to prove that you’re the only one who owns it. The whole concept is like, what the hell are you talking about?”
“[…] It’s definitely something that takes a bit of time to turn your head, especially since you can look at the NFTs out there and still copy them. As if you could just right click and save the file. “You could then say,” Oh, look, I have the file. “
This is true. However, owning a copy of the file is not the same as owning a unique digital collectible that is associated with the file. If you had a rare, one-of-a-kind baseball card, someone could make an identical photocopy of it, but that doesn’t mean they own the card in the same way as you do.
And of course, each NFT is created with different levels of programmed ownership. Some NFTs contain intellectual property rights and some do not. Some NFTs also contain physical copies of the works they are associated with, while others do not. Some NFTs also offer other benefits, such as: B. the opportunity to meet the person who issued the token. Beeple NFT buyers got a piece of the artist’s hair.
NFTs create digital scarcity in the age of internet abundance
But what’s the real point in producing a non-fungible mark? Why would anyone ever buy something like this?
Essentially, these tokens offer their developers the opportunity to create scarcity in the world of online abundance. If you create a digital painting and put it online, anyone can copy it at any time. When you post a song on the internet, anyone can listen to it, download it, and do essentially whatever they want with it (without forgery or copyright infringement).
Yes, anyone can buy the song from services like iTunes or Bandcamp, but what do they really own? Certainly a copy of the file, but there is nothing unique about this file. The buyer cannot resell the file for any value. This is why NFTs are of interest to investors: investors can buy NFTs that are associated with songs, paintings, sports moments, or whatever, and they can sell them as speculative assets.
In other words, someone who buys an MP3 file from iTunes cannot expect the file to increase in value. You cannot reasonably expect to resell the file with the potential to make a profit from it. (In fact, they cannot legally resell the MP3 file at all.)
However, the same person could buy an NFT associated with the MP3 file and very reasonably expect that the value of that NFT to increase in value and therefore could be sold for a profit. The same goes for a JPEG or PNG file of a digital painting.
(Of course, there is some debate about what NFT ownership will look like in the long run, but that, dear reader, is a different story for a different time.)
Out of curiosity, I’ve studied how NFTs actually reference the media you’re “buying” and my eyebrows are now orbiting the moon
– Jonty Wareing (@jonty) March 17, 2021
With NFT output, digital files can become speculative assets
For example, cannabis manager Edward Fairchild recently wrote in Business Insider That a non-fungible Beeple token he bought for $ 969 in December is now worth nearly $ 300,000. The NFT is linked to a digital painting entitled “Infected Culture”.
Does Fairchild own the intellectual property related to the work? Does he have the exclusive right to view the work? Does he own the only NFT associated with work? No, there are several NFTs issued in connection with Infected Culture. However, the scarcity associated with the work caused by the NFT emission allowed it to become a speculative asset.
INFECTION CULTURE pic.twitter.com/mjRDJ9m0Vw
– Beeple (@beeple) April 11, 2020
Additionally, the way NFT creators can make money from their tokens can vary in relation to how the tokens are created. Artists are sure to make money from NFT Token Drops – the initial creation and initial sale of the token. However, artists can continue to earn NFT royalties for the life of an NFT: every time an NFT trades hands, the artist has the option to receive a portion of the sale.
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Choosing the Right Platform for Issuing an NFT
After determining that you want to issue a non-fungible token, Elyashiv Finance Magnates explained, “You need to identify the markets that you want to list the NFTs on as this can affect the decision on how and where to create the NFT. “
While there are more complicated ways to “tinker” an NFT, Elyashiv recommends using a platform dedicated to building NFT. Elyashiv is not only the founder and managing partner of SPiCE VC. He is also a painter who recently sold an NFT tied to his painting “The Fingerprint”.
Elyashiv told Finance Magnates, “The easiest way to create an NFT is through a dedicated site. There are quite a few. Some of the commonly used ones are Rarible, Mintbase or Cargo. Some of the NFT marketplaces like OpenSea also support the creation of NFTs. “Another NFT creation platform, Nifty Gateway, recently attracted attention for the multi-million dollar NFT auctions it sponsors.
When choosing a platform to build your NFT, you may also want to determine which blockchain or blockchain the platform will use. Finally, there are a number of blockchains that support the creation of NFT, including Ethereum, the Binance Smart Chain, Flow by Dapper Labs, Tron, EOS, Polkadot, Tezos, Cosmos, and WAX.
Various NFT platforms offer unique opportunities to reduce high mining and coinage fees
According to CoinDesk, each of these blockchains has its own standard for non-fungible tokens. This means that if you create a non-fungible token on the Ethereum blockchain, you will only be able to sell the token on Ethereum token marketplaces. (In other words, you couldn’t sell Ethereum-based NFT on a platform that only supports Binance Smart Chain NFT sales.)
James Freeman-Turner (aka Hēran Soun), a musician and visual artist under contract with Since Editions, told Finance Magnates, “Depending on the number of pieces in your project, the amount you pay for the mining fees will play one big role when looking at platforms to shape your works. “
“My first project, an NFT music video (which I believe is the first of its genre), is a frame-by-frame project where collectors can own a frame of the video that can then be assigned and saved in Video is listed, “Freeman-Turner told Finance Magnates.
“OpenSea has a great USP that lets you avoid mining fees at the time of listing and that only triggers when the item is sold. For example, with my nearly 2,000 video images for sale, this would have been a project that only cost over $ 70,000, but using OpenSea avoided that initial effort. “
Even with these payment models, the NFT build price is an important consideration. Danny Holland, Smart Contract Engineer at Vega, told Finance Magnates, “The price of minting an NFT is highly dependent on the platform and the time of day. Minting NFTs can currently cost anywhere from $ 20 to $ 500. The creation between transaction fees and platform fees isn’t cheap. “
Choosing the right blockchain
How do you know which blockchain is the right one? Here are a few things to consider when making this decision:
- Marketplace size: Which blockchain has the most NFT buyers and sellers?
- Secondary Markets: Are there other marketplaces where NFTs can be sold and traded on the network?
- Additional apps and services: What types of wallets, exchanges, and other services are available on the blockchain network?
- Mining Fees: As Freeman-Turner told Finance Magnates, creating NFTs as an expense can be very costly. While platform choice can dictate how and when these fees are paid, some blockchains charge lower fees than others.
- Ecological damage: What is the blockchain’s carbon footprint?
Not fungible tokens and the environment
Many creators who are new to the non-fungible token world or new to the crypto industry are very concerned about this last point. After all, Bitcoin’s carbon footprint is getting almost as much media attention as its astronomical increase in value.
Therefore, those who occasionally observe the crypto world may believe that all crypto-related activities are extremely energy-intensive. Of course that’s true as all crypto transactions have a carbon footprint. However, the size of this footprint depends on the blockchain used.
Grewal told Finance Magnates, “It depends on the blockchain you’re using.”
Example: “Currently, Ethereum is the most popular blockchain for which NFTs are issued. Ethereum uses a proof-of-work consensus mechanism to verify transactions on the blockchain (and in turn make sure the NFT is “real”) computationally intensive for miners and the Ethereum network. “In other words, it has a huge carbon footprint.
“However, Ethereum is moving to a consensus mechanism for proof of use, which drastically reduces the energy burden for operating the blockchain.”
“Even now, Eth’s carbon footprint is even better than Visa’s.”
In addition, many crypto advocates argue that virtually all financial activity has a carbon footprint due to the risk of “whataboutism”. Danny Holland, Smart Contract Engineer at Vega, told Finance Magnates: “The proof of the commitment is coming, but even now the CO2 footprint of ETH is even better than that of VISA.”
“There are much bigger offenders out there and our industry is doing everything possible to deviate from proof of work,” he said.
Simona Pop, Community leader at Status, told Finance Magnates, “The environmental impact of non-fungible tokens is not fully understood at this time.” Status organizes community events for Latin American-based artists who do not have access to educational resources to create NFTs in their native language to have.
“When NFTs are created, bought and sold, the transaction in the chain needs to be verified. Similar to Bitcoin mining, registering an NFT to sell and verifying the transaction requires the use of computing power and electricity, which adds to a carbon footprint. “
If you really believe that Tezos is doing the same thing as Ethereum, but at 0.02% energy consumption, then I have a cold fusion reactor in my garage that I would like to offer you.
A thread on how the #CleanNFT movement is misunderstanding energy and undermining decentralization. pic.twitter.com/eUg0XqyHos
– Gene Kogan (@genekogan) March 12, 2021
“The elimination of middlemen from the traditional art market model and immediate access to a global market means that artists can finally make a living from their art.”
“There has been a lot of FUD (fear, uncertainty and doubt) and defamation of NFTs as a result of articles presenting the problem in apocalyptic terms. Some artists involved in crypto art have even been blacklisted, which is an unacceptable reaction considering that efforts to make NFTs greener are still ongoing. A good example of this are green NFTs. “Green NFTs is a self-described bounty initiative for“ greener NFTs (non-fungible tokens) ”.
As the NFT infrastructure community continues to work out the nature of the energy consumption in the non-fungible token market, artists will have to decide for themselves whether the benefits are worth the risk.
“NFTs are an incredibly exciting moment in the evolution of blockchain technology. They can go well beyond art and their use cases will evolve and become even more valuable, ”said Pop.
“In terms of art NFTs, eliminating middlemen from the traditional art market model and gaining immediate access to a global marketplace means artists can finally make a living from their art, create and expand global support communities, and reshape relationships and values in general. Rivers tied to their work. “